I was reading the Beck and Fordahl article, “CEO pay climbs despite companies struggles” when three sentences leapt off the page at me.
Rick Wagoner, CEO of General Motors, (GM) announced this month the company had to close four plants that make trucks and SUVs because of lagging demand as fuel prices soar. That followed the posting of a $39 billion loss in 2007, a year when its stock price fell about 19%. And Wagoner? His pay rose 64%, to $15.7 million.
Did I read that correctly? GM posted a $39 billion loss in 2007 – well actually $38.732 billion but who is counting – and that is after posting a $1.978 billion loss in 2006 and $10.567 billion loss in 2005. The company is also closing four plants, which is expected to affect approximately 2,500 employees – while some may be able to transfer into positions vacated by approximately 19,000 employees who are expected to accept early retirement and buyout offers. And while GM and its employees struggle through a very tough time, Rick Wagoner’s pay rose 64% – a truly amazing figure, particularly in light of the current state of the company.
And while, Wagoner announced that the plant closings, transition to smaller and electric cars and other cost-saving measures will save the company close to $15 billion a year, those savings are not expected to be realized until 2010. While those changes may have a dramatic impact on the business, the company’s recent performance does not warrant an increase in pay for Wagoner – surely not a 64% increase.
Jenna Goudreau wrote an interesting article in the August 6th issue of BusinessWeek on stress in the workplace. I was particularly impressed with the way in which one organization handled an overworked and stressed out manager. Based on the amount of time that he was working, the organization proactively stepped in to offer some assistance. Unfortunately, most organizations are not proactive when it comes to worker stress. Instead they tend to react only after there is a major, and sometimes (very regrettably) deadly, circumstances.
It is easy for a leadership team to only focus on bottom-line results, but through taking steps to reduce stress, they could greatly improve the overall efficiency of the organization. Think of all of the colleagues who we have lost due to feeling completely and totally overwhelmed. More often than not, they have brought the issue to the attention of their superiors, but the issue was never addressed. This, as we know, leads to the employee leaving the organization. If you think hard, you can probably think of two or three colleagues who currently fit this description.
Many companies start out by helping employees repair the work-life balance. General Mills (GIS ) provides a range of personalized services while employees at headquarters work so they can spend more time recharging with their families and less time running errands on the weekends. Want your hair colored? An in-house stylist will do it. Car need an oil change? A mechanic will do it on your lunch break.
Given the amount of time that employees spend working – being on call nearly 24 hours a day – providing services to employees to allow them more time to unwind with family and friends in non-work hours is a major step in the right direction. But, so is listening to employees, and providing them with the assistance that they need. As the article stated, sometimes it is as simple as additional headcount.
The Peter Burrows’s BusinessWeek article, How big will the iPhone be? discusses the potential impact that the iPhone may have on Apple. Burrows projects that the iPhone could translate into a $10 billion business for Apple – even in a crowded and competitive market. No one questions Apple’s brand strength and the fact that there is currently a large existing iPod customer base who will be lining up to purchase this phone, but the fact remains that the cell phone industry is crowded and highly competitive.
Two initial questions that popped into my mind were: (1) wouldn’t it have made more sense to offer this phone as an undocked phone – one that anyone can buy and add it to their carrier of choice. That way you don’t limit your potential customer base to those willing to go with the AT&T network. (2) Given the need for bandwidth for some of the phones services, wouldn’t it make more sense to focus the initial push for this phone in Asia and Western Europe? These two regions currently employ 3G networks, whereas in the U.S. 3G networks are not nearly as widespread.
While the early months of the launch will most likely contain some bumps and bruises, overall it will be very successful. But, whether the iPhone dominates the market will be determined by, in part, how successful this product is with corporate users. Currently, it is suggested that the iPhone will not support Outlook very cleanly out of the box. This will negatively impact the iPhone’s numbers – as potential buyers stick with their Blackberry’s and other smart phones due to the lack of Outlook support. In the end, Apple will go from having no presence in the cell phone market to being a major player in this space virtually over night.
Emily Thornton’s cover story, Roads to Riches, in the May 7th issue of BusinessWeek details the recent trend of State governments selling public assets – toll roads, parking garages, bridges and airports – to financial institutions and other private investors. The governmental bodies that have done this so far, or who are considering, often point to their revenue shortfalls and increasing budget deficits as justification for supporting such moves.
Thornton points out that a number of transactions have been completed over the last few years – the Chicago Skyway , Pocahontas Parkway (Virginia), the Indiana Toll Road and Chicago Downtown Parking System – while others are currently in discussions.
In the short-term this cash influx can greatly benefit the governmental entity as they can eliminate debt and improve social services. The potential long-term issues may very well outweigh the short-term benefits. While a private entity could more easily raise prices in order to pay for upgrades, without the fear of committing “political suicide,” it could effectively price out lower income individuals from being able to take advantage of once publicly owned properties.
While it is fairly obvious to see the immediate benefits to the states and the private investors, the long-term effects of these transactions will not be truly felt for years to come. I would hope that our state governments would proceed cautiously and not recklessly chase the dollars that are in front of their faces. I can’t help but wonder what will happen when the other shoe falls.
When I read the article on the suit filed by Oracle against SAP, I found myself wondering about Oracles license management system. Time and the courts will tell if SAP is guilty of the charges filed against them by Oracle, but I was surprised that Oracle customers (or SAP employees as the suit claims) would be able to download software that the Oracle customer had not licensed.
Is it legal to pretend to be your competitor’s customer and download software? If it is legal, is it ethical? In a competitive business environment, is “all fair in love and war?”
I personally believe that even if the practice is deemed legal, it is definitely unethical to pretend to be a competitor’s customer for the purpose of downloading confidential materials and software.
I was reading the Matthew Goldstein article on UBS in the March 26th issue of BusinessWeek, and I found myself fixated on one small aspect of the story. The story briefly outlines portions of Michael Guttenberg’s work history. I found myself wondering how he went from being a “sales assistant” with Axiom Capital Management to an Executive Director with UBS in four short years. Now, I will be the first to admit that I do not have intimate knowledge of the New York City Financial Services market, but to an outsider that sounds like a fairly incredible jump. I found my mind shifting from did he, and twelve others, do what they are accused of or not, to what did he accomplish during those four years that justified that type of jump?
I found another comment in the article to be very interesting as well. Goldstein, through sources that are “familiar with [Guttenberg’s] duties” labels him as a “glorified marketing executive.” I find this interesting, because one of my pet peeves is that a number of people that I have come into contact with have a low opinion of the marketing profession. So much so that they believe almost anyone can do it. While this article does not provide an exhaustive look at Guttenberg’s resume, it struck me as an example of this type of thinking. It appears that Guttenberg spent a fair amount of his time in the sales profession, but yet UBS promoted him to a marketing executive position, and on top of that placed him on “an elite committee” within the company.
Time and the courts will tell if Mr. Guttenberg and his colleagues are guilty, in the meantime I am fascinated by the progression of his career prior to this incident.
Filed under Axiom Capital Management, BusinessWeek, Financial Services, Marketing, Matthew Goldstein, Michael Guttenberg, Sales, Scandal, UBS, Uncategorized, Wall Street